Interest Rate Roundup

Wednesday, February 16, 2011

Housing starts surge, permits slump in January

We just got housing construction figures for January. Here's what the numbers showed:

* Housing starts surged 14.6% to a seasonally adjusted annual rate of 596,000 from 520,000 in December. That topped expectations for a reading of 539,000. But building permit issuance tanked 10.4% to a 562,000 SAAR from 627,000 in December. That was roughly in line with forecasts.

* By property type, single family activity dipped 1% while multifamily starts soared 77.7%. Single family permit issuance fell 4.8% while multifamily permits slumped 23.8%.

* Regionally, starts climbed 15.8% in the South, 36.4% in the Midwest, and 41.8% in the Northeast. They dipped 9.7% in the West. Permits rose 11.4% in the South. But they fell 5.3% in the Midwest, 27.3% in the West, and 38.5% in the Northeast.

Construction activity picked up nicely in January, with broad-based gains and particular strength in the apartment and condo markets. At the same time, future activity is poised to slump thanks to a notable downturn in permitting. So I'd characterize the first month of 2011 as a mixed bag for the beleaguered housing sector.

Step back from the month-to-month volatility though, and you see an industry that's basically going nowhere -- not really getting worse, but not really getting better either. Indeed, housing starts and permits have been stuck in a range of roughly 500,000 to 600,000 units for the better part of two years. That's nothing like what we've seen in past housing downturns, where activity has picked up sharply once interest rates fell. But that really shouldn't be a surprise. We experienced the biggest housing bubble in U.S. history, so the hangover is going to last a long time.


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